KUALA LUMPUR – MIDF Research expects Malaysia’s external trade to likely recover in 2024, backed by a turnaround in electrical and electronics (E&E) trade.
In a research note today, the firm said that the country’s export performance is set to rebound and grow at +5.2% this year compared to 2023’s -8.0%.
“Although the E&E exports remained below a year ago, the expected turnaround in the E&E trade will be one of the factors to support external trade recovery,” said MIDF Research.
It also said that increased demand for petroleum products and palm oil could also support export growth this year.
MIDF Research said Malaysia stands to benefit from the pick-up in regional production activities and improvement in global demand as the stronger-than-expected rebound in January 2024 was also in line with improving regional trade performance.
Malaysia’s total trade rebounded to +13.3% year-on-year in January 2024, marking the first growth in 11 months.
The better performance was due to increases in both exports (+3.4%) and imports (+5.3%) and the lower base effect.
Meanwhile, trade surplus amounted to RM10.1 billion and marked the 45th consecutive month of trade surplus since May 2020, due to the relatively stronger rise in imports.
“We still expect a pick-up in E&E trade will support the overall trade recovery and will continue to anchor for the continued trade surplus.
“We reiterate that the reduced trade surplus mainly reflected dependency on imports for products such as transport equipment, machinery, chemicals, agriculture products and even crude petroleum,” it said.
Nevertheless, several downside risks could disrupt the trade outlook, such as worsening geopolitical and trade tensions, lower demand from major trading partners, as well as prolonged weakness in global production activities, it said.
The research house also foresees Malaysia’s imports to rebound to +4.4% this year from -6.4% in 2023, on the back of expanding domestic demand and improvement in manufacturing activities.
“We believe the continued rise in imports of intermediate goods and capital goods is consistent with the better purchasing managers’ index reading in January 2024, which pointed to stabilisation in the manufacturing sector activities and optimism that demand outlook will improve.
“Going forward, imports will continue to be driven by increased investment and business activities, including inventory restocking and sourcing of raw materials. In addition, imports of consumption goods will also expand on the back of growing domestic spending,” it said. – February 20, 2024